Investors Presentation. Second Quarter 2015 Results August 4, 2015

Transcription

1 Investors Presentation Second Quarter 2015 Results August 4, 2015

2 Safe Harbor for Forward-Looking Statements Certain statements in this presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, particularly those regarding our 2015 Financial Guidance. Such forwardlooking statements are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those described in those statements. Readers should carefully review the Risk Factors slide of this presentation. These forward-looking statements are based on management s expectations or beliefs as of August 4, 2015 and as well as those set forth in our Annual Report on Form 10-k filed by us on March 2, 2015 with the Securities and Exchange Commission ( SEC ) and the other reports we file from time-to-time with the SEC. We undertake no obligation to revise or publicly release any updates to such statements based on future information or actual results. Such forward-looking statements address the following subjects, among others: Future operating results Deployment of cash and investment balances to grow the company Ability to acquire businesses on acceptable terms and integrate and recognize synergies from acquired businesses Subscriber growth, retention, usage levels and average revenue per account Cloud service and digital media growth and continued demand for fax services International growth New products, services, features and technologies Corporate spending including stock repurchases Intellectual property and related licensing revenues Liquidity and ability to repay or refinance indebtedness Network capacity, coverage, reliability and security Regulatory developments and taxes All information in this presentation speaks as of August 4, 2015 and any redistribution or rebroadcast of this presentation after that date is not intended and will not be construed as updating or confirming such information. 2

3 Risk Factors The following factors, among others, could cause our business, prospects, financial condition, operating results and cash flows to be materially adversely affected: Inability to sustain growth or profitability, particularly in light of an uncertain U.S. and worldwide economy and the related impact on customer acquisition, retention and usage levels and credit and debit card payment declines Level of debt limiting availability of cash flow to reinvest in the business; inability to repay or refinance debt when due; and restrictive covenants relating to debt imposing operating and financial restrictions on business activities or plans Inability to maintain and increase our cloud services customer base and average revenue per user Inability to acquire businesses on acceptable terms or successfully integrate and realize anticipated synergies Failure to offer compelling digital media content causing reduced traffic and advertising levels; loss of advertisers or reduction in advertising spend; inability to monetize handheld devices and handheld traffic supplanting monetized traffic Inadequate intellectual property (IP) protection, expiration or invalidity of key patents, violations of 3rd party IP rights or inability or significant delay in monetizing IP Inability to continue to expand our business and operations internationally New or unanticipated costs or tax liabilities, including those relating to federal and state income tax and indirect taxes, such as sales, value-added and telecom taxes Inability to maintain required services on acceptable terms with financially stable telecom, co-location and other critical vendors; and inability to obtain telephone numbers in sufficient quantities on acceptable terms and in desired locations Inability to manage certain risks inherent to our business, such as fraudulent activity, system failure or a security breach Competition from others with regard to price, service, content and functionality Enactment of burdensome telecom, Internet, advertising or other regulations, or being subjected to existing regulations Reduced use of fax services due to increased use of , scanning or widespread adoption of digital signatures or otherwise Inability to adapt to technological change and diversify services & related revenues at acceptable levels of financial return Loss of services of executive officers and other key employees Other factors set forth in our Annual Report on Form 10-K filed by us on March 2, 2015 with the Securities and Exchange Commission ( SEC ) and the other reports we file from time-to-time with the SEC 3

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5 Q Results Record quarterly revenue of $176M, ~21% +$30.3M vs. prior year (1)(2) Foreign currencies impacted total revenue ~($6.0M) on YoY basis M&A strategy continues across categories, geographies and services 2 acquisitions completed in Q2 2015, 2 completed in July Cloud Services All-time record Cloud Services revenue in Q of $124M (1)(2) Q2 revenue up +$18M, +17% vs. prior year, F/X impact ~($5.2M) (1)(2) Other Cloud Services revenue +$16M +90% vs. prior year (1)(2) Media Q revenue up +12.6M +33% vs. prior year (1) EBITDA margin improve significantly ~37% vs. ~29% in prior year (1) (1) See slides 6, 22 and 24 for a reconciliation to GAAP earnings per diluted share and EBITDA margins. (2) Figures are Adjusted Non-GAAP. See Slide 24 for reconciliation to Non-GAAP Revenues. 5

6 Q Results vs. Prior Year Total Cloud by Unit Cloud Services IP Licensing Q Q Q Q Adj. Non-GAAP Revenues (1) $ 106,326 $ 123,905 $ 1,183 $ 1,283 Adj. Non-GAAP Gross Profit (1) 86, ,186 1,183 1,283 Adj. Non-GAAP Operating Profit (1) $ 50,210 $ 57,632 $ 739 $ 881 EBITDA (1) $ 52,078 $ 59,795 $ 739 $ 881 % of Revenue 49% 48% 62% 69% By Segment Total Cloud Digital Media j2 Global Q Q Q Q Q Q Adj. Non-GAAP Revenues (1) $ 107,509 $ 125,188 $ 38,221 $ 50,850 $ 145,729 $ 176,038 Adj. Non-GAAP Gross Profit (1) 87, ,468 33,776 45, , ,300 Adj. Non-GAAP Operating Profit (1) $ 50,950 $ 58,512 $ 9,756 $ 17,383 $ 60,705 $ 75,895 EBITDA (1) $ 52,817 $ 60,675 $ 10,914 $ 18,879 $ 63,732 $ 79,555 % of Revenue 49% 48% 29% 37% 44% 45% Adjusted Net Income (1) $ 40,542 $ 48,037 EPS (1) : Adj. Non-GAAP $ 0.84 $ 0.99 GAAP $ 0.73 $ 0.80 (1) See slide 24 for a reconciliation to GAAP earnings per diluted share and slide 25 for a reconciliation of EBITDA to Net Income by segment. 6

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8 Revenue Mix by Service Revenue increased across all core services vs. prior year Customer count grew by +40k QoQ, +346k vs. prior year 8

9 All Time Record Low User Cancel Rate for Cloud Business User cancel rate declined to record low of 1.9% efax, evoice, Cloud Backup driving improvement All Time Record Low (1) User cancel rate, also called user churn, is defined as cancellation of service by Cloud Business customers with greater than 4 months of continuous service (continuous service includes Cloud Business customers that are administratively cancelled and reactivated within the same calendar month). User cancel rate is calculated monthly and expressed here as an average over the three months of the quarter. 9

10 Cloud Connect Premium fax & voice brands revenue grew efax Q revenue +3% vs. Q2 14 and Q1 15 evoice/ereceptionist/city Numbers Q revenue +12% vs Q2 14 and +4% vs. Q1 15 Corporate Fax Q revenue +16% vs. Q2 14 and +6% vs. Q1 15 International Cloud Connect Q revenue +8% vs. Q1 15 despite currency fluctuations Deployed new Android mobile apps to enable sign-ups and increase functionality on efax Small fax acquisition executed in July 10

11 Cloud Backup Update Q revenue +40% vs. Q2 14 and +27% vs. Q1 15 Integration of recent acquisitions; EBITDA margin at 44% SugarSync integration complete, significant synergies achieved Livedrive successfully launched in July in 700 Carphone Warehouse stores across the UK Completed 3 acquisitions since last earnings call KeepItSafe successfully launched Cloud2Cloud Agentless data backup in SaaS/PaaS clouds to high secure & local DCs Mass deployment of backup rules to MS Office 365 and Google App users ensuring consistent protection with minimal configuration effort Works with existing KeepItSafe online backup account Designed to meet or exceed regulatory & compliance requirements 11

12 Security Update 2015 Q2 Highlights Q revenue +245% vs. Q1 14, +7% vs. Q1 15 Near term focus on integration of acquisitions Excel Micro: Nuvotera customer base integrated into Excel Micro Nordics: Significant investments made in Swedish and Danish datacenters On track for customer upgrades to Fus platform starting Q

13 Marketing Update Marketing Q2 15 revenue +90% vs. Q2 14, +16% vs. Q1 15 M&A and integration Commenced migration of direct customers Contactology integration plan on schedule Good traction with Campaigner White Labeled Reseller Partner Program New integration capabilities using WebHooks and localization features 13

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15 Q Digital Media Highlights Digital Media business demonstrating strong fundamentals Revenue of $50.8M, +33% vs. Q2 14 EBITDA of $18.9M, up significantly, +73% vs. Q2 14 EBITDA margin growth to 37% vs. 29% for Q2 14 Visits to owned and operated sites were up 54% YoY at 932M (1) Performance Marketing (CPC-CPA-CPL-CPI) continues to drive growth, up +61% vs. Q PCMag, AskMen, & IGN delivered 14.3M clicks to retailers, +17% vs. prior year PCMag.com achieved its highest commerce quarter in history, eclipsing Q4 14 holiday season by 26% Continuing initiative to enter high-value B2B categories, with content creation in VOIP, CRM, collaboration, web conferencing, IT management, learning management systems and help desk verticals (1) Google Analytics (GA) 15

16 Q Digital Media Highlights (continued) Ookla continues to expand its audience and engagement for speed tests across devices Ookla's mobile Speedtest app installs surpassed 144M in Q2 2015, a 49% increase vs. Q Total speed tests hit 441M in Q2 2015, 20% increase vs. Q The Android Speedtest app set a new quarterly usage record at 122.6M tests in Q2 15, 29% increase vs. Q2 14 IGN video and mobile growth continues: IGN set new record for video views in Q2 15 with 447M views across all platforms Launched IGN Plays Live, featuring live gameplay sessions with IGN editors and game developers three times a week IGN live-streamed coverage of E IGN s biggest week in history - 28M visitors 1) IGN s YouTube channels reached the 7M subscriber mark in Q while growing 32% YoY (2) Mobile native app installs passed the 5 million mark, with 2.9M ios and 2.2M Android IGN apps installed on devices (3) Ziff Davis expands to new territories: PCMag India (in.pcmag.com) AskMen Israel (il.askmen.com) (1) (2) AskMen Portugal (pt.askmen.com) (1) Google Analytics (GA) (2) YouTube (3) GA and AppAnnie 16

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18 Reconfirming 2015 Guidance Revenues $690M - $710M Adjusted Non-GAAP EPS (1) $ $3.97 (1) Adjusted earnings per diluted share excludes share-based compensation, amortization of acquired intangibles and the impact of any currently anticipated items, in each case net of tax. It is anticipated that the effective tax rate for 2015 (exclusive of the release of reserves for uncertain tax positions) will be at the higher end of the range between 27% and 29% 18

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20 I--(millions)--I (in Thousands) I Financial Metrics: Consolidated j2 Global Consolidated Q1 Q2 Q3 Q4 Q1 Q2 Total GAAP Revenues $134,124 $144,744 $153,018 $167,145 $161,253 $176,038 Adjustments (1) $541 $985 $213 $336 $0 $0 Total Adjusted Non-GAAP Revenues $134,665 $145,729 $153,231 $167,481 $161,253 $176,038 Adjusted Non-GAAP Revenue By Segment Cloud Revenues $101,371 $107,509 $110,068 $114,603 $118,061 $125,188 Digital Media Revenues $33,294 $38,221 $43,163 $52,878 $43,192 $50,850 Total Adjusted Non-GAAP Revenues $134,665 $145,729 $153,231 $167,481 $161,253 $176,038 Diluted EPS GAAP $0.60 $0.73 $0.60 $0.66 $0.45 $0.80 Adjusted Non-GAAP (2) $0.76 $0.84 $0.83 $0.98 $0.85 $0.99 Cash & Investment $315.1 $708.5 $683.8 $590.4 $539.5 $567.3 Free Cash Flow (3) $38.4 $54.1 $39.1 $39.8 $43.6 $54.9 EBITDA (4) $57.3 $63.7 $64.7 $76.9 $69.3 $79.6 (1) Q1 Q revenue adjustments add back the impact of fair value adjustments to deferred revenue purchased in the Livedrive acquisition (2) See slide 24 for a definition of adjusted Non-GAAP diluted earnings per share (EPS) and a reconciliation to diluted GAAP EPS (3) See slide 22 for a definition of Free Cash Flow (4) See slide 22 for a definition of EBITDA and reconciliation to Net Income 20

21 (in Thousands) I Financial & Other Metrics Cloud Services & Media Total Cloud Q1 Q2 Q3 Q4 Q1 Q2 Adjusted Non-GAAP Revenue By Type Fixed Subscriber Revenues $81,020 $86,492 $89,535 $93,367 $96,097 $102,437 Variable Subscriber Revenues $18,373 $19,633 $19,113 $19,273 $19,687 $21,368 Subscriber Revenues $99,393 $106,125 $108,648 $112,641 $115,784 $123,805 Other Licenses Revenues $1,978 $1,384 $1,419 $1,962 $2,277 $1,383 Total Adjusted Non-GAAP Cloud Revenues $101,371 $107,509 $110,068 $114,603 $118,061 $125,188 Adjusted Non-GAAP Revenue - DID vs. Non-DID DID Based Revenues $85,782 $87,685 $87,540 $86,747 $85,777 $88,945 Non-DID Based Revenues $15,589 $19,824 $22,527 $27,856 $32,284 $36,243 Total Adjusted Non-GAAP Cloud Revenues $101,371 $107,509 $110,068 $114,603 $118,061 $125,188 Cloud Services Customers (1) 2,523 2,590 2,623 2,655 2,896 2,936 Average Monthly Revenue/Customers (2) $13.78 $13.84 $13.90 $14.23 $13.91 $14.15 Cancel Rate (3) 2.3% 2.0% 2.2% 2.1% 2.2% 1.9% Web Traffic (4) Media Q1 Q2 Q3 Q4 Q1 Q2 Visits 594, , , , , ,769 Pageviews 2,021,455 1,963,360 1,888,234 2,129,433 2,391,570 2,226,210 (1) Cloud Services Customers are defined as paying DIDs for Fax & Voice services and direct and resellers accounts for other services (2) Quarterly ARPU is calculated using our standard convention of applying the average of the quarter s beginning and ending customer base to the total revenue of the quarter (3) User cancel rate, also called user churn, is defined as cancellation of service by Cloud Business customers with greater than 4 months of continuous service (continuous service includes Cloud Business customers that are administratively cancelled and reactivated within the same calendar month). User cancel rate is calculated monthly and expressed here as an average over the three months of the quarter. Calculated monthly and expressed here as an average over the three months of the quarter. (4) Web Traffic figures based on Omniture and Google Analytics 21

22 GAAP Reconciliation Free Cash Flow & EBITDA ($ in millions) Free Cash Flow (1) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Net cash provided by operating activities $ $ $ $ $ $ Less: Purchases of property and equipment ($2.936) ($1.087) ($3.124) ($4.074) ($2.401) ($4.554) Add: Excess tax benefit (deficit) from share-based compensati $4.082 $0.721 $1.925 $0.111 $0.334 $1.770 Add: IRS Settlement $0.000 $0.000 $0.000 $0.000 $0.000 $5.753 Free cash flow $ $ $ $ $ $ EBITDA (2) Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Net income $ $ $ $ $ $ Plus: Other expense (income), net ($0.319) ($0.186) $ $0.089 ($0.784) $0.088 Interest expense (income), net $4.948 $5.682 $0.251 $ $ $ Income tax expense $8.191 $4.292 $7.345 $ $9.124 $0.181 Depreciation and amortization $ $ $ $ $ $ Share-based compensation and associated payroll tax expense $2.384 $1.963 $2.191 $2.370 $3.004 $3.168 Acquisition-related integration costs ($0.501) $1.615 $0.369 $0.952 $3.534 $1.895 Additional indirect tax expense from prior years $0.713 $0.000 $0.000 $0.000 $1.118 $2.533 Fees associated with prior year tax audits $0.000 $0.000 $0.773 $0.650 ($0.204) $0.000 EBITDA $ $ $ $ $ $ (1) Free Cash Flow is defined as net cash provided by operating activities, less purchases of property, plant and equipment, plus excess tax benefits (deficiency) from share based compensation. In addition, the amount shown for Q excludes the effect of payments associated with taxes for prior periods under audit. Free Cash Flow amounts are not meant as a substitute for GAAP, but are solely for informational purposes (2) EBITDA is defined as net income plus interest and other expense, net; income tax expense; depreciation and amortization and the items used to reconcile GAAP to Adjusted Non-GAAP EPS. EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes 22

23 Margin Contribution Adjusted Non-GAAP In Millions Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Cloud - Services Revenues $99.4 $ $108.9 $113.4 $115.8 $123.9 Gross Profit $80.5 $ 86.1 $86.8 $90.5 $92.7 $100.2 Gross Profit % 81% 81% 80% 80% 80% 81% EBITDA (1)(2)(3) $47.0 $ 52.1 $51.2 $55.8 $54.0 $59.8 EBITDA % 47% 49% 47% 49% 47% 48% Digital Media Revenues (1) $33.3 $ 38.2 $43.2 $52.9 $43.2 $50.8 Gross Profit (1) $29.4 $ 33.8 $37.9 $47.4 $38.8 $45.8 Gross Profit % 88% 88% 88% 90% 90% 90% EBITDA (1)(2) $8.5 $ 10.9 $12.7 $20.9 $13.7 $18.9 EBITDA % 26% 29% 29% 40% 32% 37% IP Licensing Revenues $1.9 $ 1.2 $1.2 $1.2 $2.3 $1.3 Gross Profit $1.9 $ 1.2 $1.2 $1.2 $2.3 $1.3 Gross Profit % 100% 100% 100% 100% 100% 100% EBITDA (2)(4) $1.8 $ 0.7 $0.8 $0.2 $1.6 $0.9 EBITDA % 92% 62% 69% 16% 70% 69% (1) Excludes certain intersegment revenues and expenses (2) EBITDA is defined as net income plus interest and other expense, net; income tax expense; depreciation and amortization and the items used to reconcile GAAP to Adjusted Non-GAAP EPS, EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes. See slide 22 for reconciliation of EBITDA to Net Income (3) Includes $1.9M corporate costs (4) IP Licensing EBITDA includes estimated expense associated with IP Licensing operations plus an allocation of overhead costs 23

24 GAAP Reconciliation Q2 Adjusted Non-GAAP Earnings & EPS ($ in thousands) THREE MONTHS ENDED JUNE 30, 2015 THREE MONTHS ENDED JUNE 30, 2014 (2) (6) (2) (6) Acquisition- (4) Additional Acquisition- Additional (1) related (3) IRS Tax Expense (1) related Tax Expense Share-based Integration Interest Consulting (5) (Benefit) from Adjusted Share-based Integration (5) (Benefit) from Adjusted GAAP Compensation Costs Costs Fee Amortization Prior Years Non-GAAP GAAP Compensation Costs Amortization Prior Years Non-GAAP Revenues $176,038 $176,038 $144, $145,729 Cost of revenues 29,494 (91) 27 (666) 28,764 25,558 (27) (855) 24,676 Operating expenses: Sales and marketing 40,421 (603) (230) 39,588 35,329 (426) (41) 34,862 Research, development and engineering 8,969 (213) 8,756 7,600 (222) 7,378 General and administrative 47,088 (2,261) (1,692) (17,568) (2,533) 23,034 31,419 (1,288) (589) (11,435) 18,107 Interest expense (income), net 10,881 (1,805) (472) 8,604 5,682 (439) 5,243 Other expense (income), net (185) (185) Income tax provision (7) ,935 11,887 19,167 4, ,982 5,487 15,106 Net income $38,916 2,223 1,178 1,308 (5) 13,299 (8,882) $48,037 $35,049 1,267 1,405 8,308 (5,487) $40,542 Net income per share attributable to j2 Global, Inc. common stockholders (8) : Basic $ (0.00) 0.28 (0.19) $0.99 $ (0.12) $0.85 Diluted $ (0.00) 0.28 (0.19) $0.99 $ (0.12) $0.84 Adjusted Non-GAAP net income is not meant as a substitute for GAAP, and is defined as GAAP net income with the following modifications: 1) Elimination of shared-based compensation expense and associated payroll taxes 2) Elimination of certain acquisition-related integration costs and the impact of fair value adjustments to deferred revenue purchased in Livedrive acquisition 3) Elimination of interest costs in excess of the coupon rate associated with the convertible notes 4) Elimination of IRS consulting fees 5) Elimination of amortization of acquired patents and intangible assets 6) Elimination of additional income tax (expense) benefit from prior years 7) Addition of income tax provision associated with the noted modifications 8) Reconciliation of Net Income per share from GAAP to Adjusted Non-GAAP Net Income Per Share may not foot because each is calculated independently 24

25 GAAP Reconciliation EBITDA Q ($ in thousands) EBITDA CONSOLIDATED CLOUD & DIGITAL MEDIA Q (1) Cloud Subscription Corporate and Inter-segment elimination Cloud Services Cloud IP Licensing (2) Total Cloud Digital Media Consolidated Net income (loss) 42,219 (6,642) 35,577 (916) 34,661 4,255 38,916 Plus: Other expense (income), net 236 (5) 232 (2) 229 (142) 88 Interest expense (income), net 5,308 2,772 8,080-8,080 2,801 10,881 Income tax expense (3,008) 333 (2,674) (94) (2,769) 2, Depreciation and amortization 13,056-13,056 1,893 14,950 6,943 21,893 Reconciliation of GAAP to Non-GAAP financial measures: Share-based compensation and the associated payroll tax expense 1,074 1,673 2,747-2, ,168 Acquisition-related integration costs ,651 1,895 Additional indirect tax expense from prior years 2,533-2,533-2,533-2,533 EBITDA 61,657 (1,862) 59, ,675 18,879 79,555 (1) EBITDA is defined as net income plus interest and other expense, net; income tax expense; depreciation and amortization and the items used to reconcile GAAP to Adjusted Non-GAAP EPS EBITDA amounts are not meant as a substitute for GAAP, but are solely for informational purposes. See slide 22 for reconciliation of EBITDA to Net Income (2) IP Licensing EBITDA includes estimated expense associated with IP Licensing operations plus an allocation of overhead costs 25

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